Sir Winston Churchill to be the next face on the five pound note

The Governor of the Bank of England, Mervyn King, shows the design to Cameron...

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Liebrary: Is Corporation Tax being cut to make us more competitive? Or is there another reason?

Adam Smith, the patron saint of capitalism, theorised that by everyone behaving selfishly the 'invisible hand' of all the selfishness will distribute the wealth of the nation as if "the earth had been divided into equal portions among all its inhabitants". Smith wrote: 

"The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society"

So why hasn't this beneficial outcome happened in Britain? Perhaps the flaw is it requires everyone to behave selfishly. Not just the wealthy, but also the rest of us. Just as the rich demand the gratification of their insatiable desires, for the 'invisible hand' to succeed ordinary Brits must demand as big a share as they can grab. Is it the fine balance of grasping that is the key? Is it all our fault, that although the wealthy are grabbing we aren't doing our bit?

During this time of 'austerity' appeals are made to the unselfishness of us Britons by political and business leaders claiming "we are all in this together". 

Are we ripped-off Britons too gullible, accepting wage freezes, benefits cuts, withdrawal of decent pensions, curtailment of employment rights? Governments have cleverly targeted minorities for their austere medicines. But as the scythe progressively cuts at one minority after another, we slowly realise that we are all minorities one way or the other: the disabled; the unemployed; the teachers; the public servants; the pensioners; the soldiers; the students; the nurses... 

The reality is those who make the appeals rely on the unselfishness of others as they selfishly feather their own nests. Cuts for all - with the biggest being tax cuts for companies, their top executives, and their owners.

For this post we focus on corporation tax cuts, and refer to some interesting graphs from the 2013 Budget Document:

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“Big 4” accountancy firms use knowledge gained from staff seconded to Treasury to help clients avoid taxes

"Scam": PricewaterhouseCoopers, Deloitte, Ernst & Young, KPGM... Fee tries to explain, but KJ and Chris get there in the end...

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Rip-off News round-up. Our pick of the last week's media (Thu 25th April)

Famous academic paper used to make the case for austerity cuts contains major errors

Another surprise is that the mistakes, by two eminent Harvard professors, were spotted by a student. He'd spotted a basic error in the spreadsheet. The Harvard professors had accidentally only included 15 of the 20 countries under analysis in their key calculation (of average GDP growth in countries with high public debt). BBC NEWS
(“When the facts change, I change my mind. What do you do?” – JM Keynes c.1940. “I change the facts” – George Osborne c.2013.)

OFT accuses pharma giant GSK of 'pay-for-delay' deals to protect profits

GlaxoSmithKline has been accused of paying three other firms to delay the release of cheaper copies of its anti-depressant drug, Seroxat, in a bid to protect one of its best performing products. The introduction of cheaper “generic” medicines leads to strong competition on price, drives savings for the NHS, benefit patients and, ultimately, taxpayers. GSK said they had only just received the OFT objections and needed “time to carefully review it.”  TELEGRAPH
(“How much time? About the same time it takes to collect our paper trail of bribery, then shred it,” said our pharma insider…)

Big Six energy firms 'hide profits to dodge price controls' and cash in as household bills soar
Energy firms may be hiding their profits from energy regulator Ofgem and understating how much they make from consumers. Their accounting methods could be obscuring how much energy groups earn from UK households, making it harder for Ofgem to regulate pricing. It follows the revelation last week that many of the big six energy firms – RWE npower, ScottishPower, SSE, Eon, Centrica and EDF – pay little or no tax in Britain. DAILY MAIL

Shelter inundated as housing costs and benefit cuts bite
Housing benefit changes and soaring living costs mean growing numbers of tenants are struggling to pay bills. A series of welfare changes took effect this month, including a £26k/year cap on household benefit claims, begun in four London boroughs and to be implemented nationwide from 15 July. Also, the so-called bedroom tax, which will result in social housing tenants losing 14% of their housing benefit if they are deemed to have one spare bedroom, or 25% if they are deemed to have two.  GUARDIAN

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Every minister should spend a year living the life of the people their policies affect the most

Osborne and Cameron see the light?...

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Liebrary: Are wages and employment rights being cut to make Britain more competitive? Or is there another reason?

Our leaders tell us we must be more competitive. So we can work ourselves out of the banker induced crisis. They tell us that to earn money to pay off the debts that came from the crisis we must compete with other countries to attract companies to Britain. 

To do this they tell us we must have a more flexible labour market (i.e. easier for companies to fire us), more competitive wage structure (i.e. pay us lower wages), and we must cut corporation tax for the companies (i.e. reduce companies' contribution to the public purse, paying for the NHS, schools, defence, roads and stuff like that).

So we thought we would look to see how uncompetitive we actually are in terms of wages, sackings, and tax at the moment:

a) Compare wages, and we see the UK average wage measured by the EU is well below other major European countries, and below the average of all the EU27 countries.

Statistics from the European Union, Europa.eu (As figures are in Euros, UK average wage rise is impacted by exchange rate of strengthening pound in this period)

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Big Six energy firms accused of being a 'cold-blooded profiteering' cartel, hiking prices and dodging tax

Chris meets an energy fat cat...

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Rip-off News round-up. Our pick of the last week's media (Thu 18th April)

Welfare cuts to hit the north and regions up to five times as hard as the Conservative heartland southern counties
Blackpool, the hardest-hit town, will see an average loss of £914 a year for every working age adult, or 4.65% of household incomes. It is only 0.86% in Surrey. This will also make a Conservative majority at the next election more unlikely, as those are the areas where the Tories must win more seats. FINANCIAL TIMES

Royal Bank of Scotland should stay in public ownership for now, says poll

A YouGov poll reveals only 9% of voters think RBS should see a swift return to the private sector, while 66% call for bailed out bank bosses to return their knighthoods. The government is understood to be keen to kickstart the selloff of part of its 82% stake in the bailed out RBS before the general election in 2015, even though – on current prices – this would involve a loss of around £20bn. GUARDIAN
(66%? What did the other 34% want done to those bank bosses?..)

Big six energy firms accused of 'cold-blooded profiteering'

Official figures showed the big six energy firms had more than doubled their retail (i.e. selling to households and businesses) profit margins over the last 18 months and were now earning an average of £95 profit per household on dual-fuel bills. Ofgem also said average margins in generation (i.e. extracting the oil and gas) across the big six increased from 18.4% in 2010 to 24.4% in 2011. Critics accuse energy firms of acting as a profiteering cartel, forcing poor households to either “heat or eat.” GUARDIAN
(“Hey, we’re also faced with a choice that rhymes. Compete or cheat...” said our energy fat cat insider.)

MP’s outraged that RWE, npower and others have paid little or no corporation tax despite significant profits rise

A spokesman for the energy sector defended them, saying they had spent tax-deductible billions on investment, and in any event paid proportionately more tax than other sectors compared to its contribution to GDP. But they are accused of hiding profits through the complex relationship between different divisions of the same company. Selling energy to consumers – the retail market – is separate from the business of energy generation, and they also have energy trading arms that buy and sell power daily in the "spot" and futures markets. GUARDIAN

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Welfare cuts will hit the north as much as five times as hard as the Conservative heartland southern counties

Cameron ponders the implications with IDS, Osborne and his party...

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Britain tops Europe's fuel poverty league table

Chris, KJ and Fee v the "Strivers v Skivers" brigade...

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New pension scandal: employers add "consultancy" fees to the new automatic workplace pension schemes that can reduce your pension by 50%

From our guest author, the pensions expert Dr.Ros Altman: The FSA is allowing employers to pay huge fees to unauthorised 'advisors' with money taken from employee pension funds. All for advice that doesn't have to benefit the employees, and for fees that can reduce their pensions by half.

Workers' pension funds being raided to pay fees for employer advice: As millions of workers are being automatically enrolled into a workplace pension scheme, it has emerged that many employers can arrange for huge fees to be taken out of their employees' pension funds.  The money is deducted to pay for advice to the company, not to the workers who foot the bill.

The consultants are not even qualified or regulated properly: These fees are being paid to 'consultants' who are advising the employer on setting up their pension scheme. Although the consultants are paid out of the workers' pensions, the employees themselves usually get nothing for it. Worse still, because the advice is being given to a firm and not an individual, the usual regulatory protections do not apply.  These consultants are not even required to having any standard qualifications and are not covered by the normal regulatory protections.

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Rip-off News round-up. Our pick of the last week's media (Thu 11th April)

Barclays’ tax avoidance division generated £1bn annually

Barclays ran a Structured Capital Markets department to enable its clients to avoid tax. Embarrassed, Barclays closed down this "industrial-scale tax avoidance" department, but the 100 staff were redeployed rather than sacked. GUARDIAN

(“Redeployed after retraining, mind you. Yup, we got the 100 staff to retrain the rest of us!” said our Barclays insider...)

Wealthy individuals stash as much as $32tn (£21tn) in overseas havens

Leaks expose anonymous companies in tax havens serving the super-rich. A woman runs 1,200 firms from a Caribbean rock. 'Sark Lark' former Channel islanders, now scattered around the world, take a fee to disguise the ownership of thousands of companies. The British Virgin Islands is now the world's biggest provider of offshore entities, yet the UK refuses to stop it. It only takes 3 bits of paper to create a “nominee” company for dodging tax. GUARDIAN

One in four of the UK's top companies pay no tax while we give THEM millions in credits

Many of them claim that the UK is not where most of their profits are made. The EU intends to force all corporates to lift the veil on their tax payment, country by country. Corporates that paid zero tax include TUI Travel, Tate & Lyle, and British American Tobacco. DAILY MAIL

(Wow! Where are those profits made and massive taxes paid? In China? India? “Errr... they smoke a lot of cigarettes in the Cayman Islands,” said our British American Tobacco insider...)

Veterinary drug bute found in Asda corned beef

Bute is banned from the human food chain. But the Food Standards Agency (FSA) said the risk from eating products containing contaminated horse meat was low. The government has been blamed for cutting the budgets of the FSA. Fears remain that the food regulators are simply incapable of monitoring our food adequately. GUARDIAN

(“And if horsemeat can slip into our food unnoticed, what else could have? Look at this I found. It’s got mustard on it. Pickled gherkins. Encased in bagel...” said our FSA expert...)

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Where are our conviction politicians now, Mr Cameron?

What can Cameron learn from Margaret Thatcher so the Tories win the next election...

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Have regulators in other sectors learned the lessons of the bad bankers? OFGEM's piffling "record" fine on energy firm SSE for mis-selling suggests not.

In the first week of April 2013 out came three reports two detailing naughtiness and incompetence in banks, Barclays and HBOS, and one in the energy supplier SSE. All three showed deeply ingrained recklessness in the pursuit of profit. While Britain has stood gobsmacked at the greed of bankers, are we missing the fact that what started in the City has infected other industries and professions?

Letting bankers off their leashes by deregulation in the 1980’s, leaving no effective restraint on rip-offs nor on remuneration, sent a strong message to all other sectors. The message was no matter what you did, if you were paid a lot you must be good. And there is no body in Britain who will stand in your way.

The dash for cash corrupted other industries and professions, even reaching our sainted GPs who took a dash of cash with a new pay deal in 2004

“Family doctors' hours have been cut and their productivity has fallen at the same time as some received up to 58 per cent salary increases" Commons Public Accounts Committee.

People were judged not by what they did, but by what they were paid. High pay justified how low you could go to snatch the pay. In his review of Barclays, published in April 2013, Anthony Salz (vice-chairman of Rothschilds, so no stranger to bonuses himself) said:

“If there are no other significant forms of recognition for good performance, bonuses for achieving financial outcomes will be seen as the major organisational response employees experience. Financial outcomes then become what employees believe the organisation values.” 

The ruined bank HBOS followed a reckless strategy that created a fountain of money for the directors and senior staff. The Parliamentary Commission on Banking Standards said:

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Most people eligible for benefits are in work, because benefits subsidise employers who pay low wages

Fee and KJ work out who the real scroungers are...

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Rip-off News round-up. Our pick of the last week's media (Thu 4th April)

Over 300 banking adverts caught mis-selling last year 
Financial companies were forced to remove or amend more than 300 advertisements last year. But the bank regulator refused to name the offending promotions. So consumers have no way of knowing if they were a victim. Consumer champion Which? says: “It’s ridiculous that if you run a misleading advert for chocolate spread you’re named and shamed, but the names of the firms that have issued hundreds of misleading adverts for complex savings, investments, insurance products and bank accounts are kept secret.” A study six years ago found that more than three-quarters of all adverts published broke the bank regulator's rules. FINANCIAL TIMES
(Said the bank regulator: “Of course we won’t name the offending banks. They lied. They were caught lying. They were forced to stop lying... For an industry that depends on lying, that’s punishment enough.”)

Employers raid workers' pensions to pay fees for external consultancy

New pension rules mean millions of workers are being automatically enrolled into a workplace pension scheme. The consultancy is for setting up these schemes, but the advice is of no benefit to the workers. Despite this, many employers are charging the huge consultancy fees to the individual employees' pension funds.  For example, fees deducted from each worker’s pension can be £400-£450 for the first year plus ongoing annual charges. For a low earner, this could see their pension fund reduced by nearly half in the first year. The government regulators have no plans to intervene. MONEY OBSERVER
(You plebs are too stupid to save for your old age. Your government’s too stupid to save for your old age. So everyone’s gonna have to depend more and more on their employer and the private pension providers. And as you can see from the huge fees they charge, they’re not stupid at all…)

Energy supplier SSE fined £10.5m for mis-selling gas and electricity

The SSE fine is the largest ever imposed on an energy supplier by Ofgem. EDF Energy was forced to pay £4.5m compensation last year. Investigations into E.On, Scottish Power and Npower are still continuing. Among the catalogue of evidence, some customers were told they would save money when in fact they were switched onto a more expensive contract. The people SSE employed to audit doorstep sales got a commission on sales, so had no incentive to report mis-selling. SSE was forced to stop doorstep sales in 2011 due to mis-selling, but continued it in stores and over the phone. The fine is 0.5% of the cash generated year-in and year-out by SSE. No heads have rolled among SSE's senior executive team, but their bonuses have been squeezed. BBC NEWS

(Bonuses "squeezed"? And what’s the difference between squeezed and cut? When you squeeze something you make it smaller, temporarily. Sometimes you just change its shape a little.)

Welfare cuts unjust, say four churches

The Easter criticism comes from the Baptist Union of Great Britain, the Methodist and United Reformed Churches, and the Church of Scotland. They accuse politicians and parts of the media of making the cuts easier to impose by misrepresenting poor people as lazy. They said the British public had "come to believe things about the poorest in our society which are just straightforwardly not true... The public believes that the major cause of poverty is laziness, yet the majority of people in poverty work." Figures published by the Institute of Fiscal Studies estimates that families will be an average of £891/year worse off starting this week because of tax rises and cuts to tax credits and benefits introduced since 2010. BBC NEWS
(Said one bishop: “This crisis was caused by the rich and powerful! And what a time to launch all these cuts against the poor! It’s Easter. The holiest part of the Christian year. When we remember how the life of one that was innocent and defenceless was taken, so that the rest of us can be saved... Oh, right… I get it now…”)

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